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"Macro" Is Now Part of Job Description For Portfolio Managers

When a famous portfolio manager (who will remain nameless) was recently asked, "What do you like least about your job," he answered, "The fact that 'macroeconomics' is now part of the job description because of all the economic changes that are going on globally."

We learned that the hard way, living in Mexico in 1994. Things were cheap, and the country was very hopeful that it would soon make its way into the first world. But everyone around us was living in a fools' paradise. The overheated Mexican economic had been fueled by a flood of cheap foreign money. When that left the country, the economy went to pot.

Stock selection is only as good as your underlying assumptions. Most of the time, those underlying assumptions include a stable economy. Problem is, if the assumptions fall apart, so will your investment thesis, and hence your portfolio.Therefore, it pays to keep an eye on the macro situation.  Those of us Americans that had spent a year in Mexico together learned a lesson that will last us for the rest of our professional lives.